Public Bill Committee

[Mr. Peter Atkinson in the Chair]

Clause 93

Publishing details of deliberate tax defaulters

David Gauke: I beg to move amendment 81, in clause 93, page 45, line 27, leave out £25,000 and insert the greater of
(i) £25,000 or
(ii) a percentage of the persons income as determined by an order made by the Treasury..

Peter Atkinson: With this it will be convenient to discuss the following: amendment 82, in clause 93, page 45, line 30, after deliberate, insert and concealed.
Amendment 83, in clause 93, page 45, leave out lines 32 to 40.
Amendment 84, in clause 93, page 46, line 14, at end insert
(5A) No information may be published without the consent of the Chief Executive of Her Majestys Revenue and Customs..
Amendment 85, in clause 93, page 46, line 18, at end insert and
(c) inform the person of his right of appeal under subsection (11A) below.
Government amendment 305
Amendment 86, in clause 93, page 46, line 36, at end insert
(11A) No information may be published until the person has had the opportunity to appeal to the First Tier Tribunal for an in-camera hearing against the decision to publish details of that person.
(11B) The Treasury may by order made by statutory instrument make provision for and in connection with appeals to the First Tier Tribunal under subsection (11A)..

David Gauke: I welcome you to the Chair, Mr. Atkinson. From the outset, I make it clear that we do not necessarily object to the use of the naming and shaming provisions in clause 93. However, we have a number of specific concerns, some of which we have addressed in this group of amendments.
Clause 93 sets out a new regime for publishing details of deliberate tax defaulters. This is, as we will debate at slightly greater length, an arrangement that was not consulted on before the Budget and, with the publication of the Finance Bill, a number of specific concerns have been raised about the regime. I will briefly set out the concerns that we attempt to remedy in the amendments, the first of which is that the application of the naming and shaming regime applies where there has been potential lost revenue, in relation to the relevant penalty, of more than £25,000. That can be an amount that applies to a number of different taxes and may have accrued over a number of different tax years. The particular concern of a number of outside bodies is that the £25,000 limit is a blunt instrument. Clearly, £25,000 in lost revenue would be quite considerable for most individuals or small companies. However, for a very wealthy individual or a large company or partnership, £25,000 is not particularly considerable and there is a danger that this naming and shaming regime may apply to relatively small amounts.
Consequently, amendment 81 seeks to make the £25,000 test a bit more sophisticated, if I can put it that way, in the sense of still having a de minimis requirement of £25,000, but for an entity or for a person with a large income there shall also be a test of a percentage of that income. That would prevent the concern, raised by a number of outside bodies, that persons may be caught for what is, in their overall tax liability, a small amount of money.
We are keen to hear the Ministers assessment of why the £25,000 figure was chosen and whether it is possible to have a differential rate so that we can assess the scale of the mischief, or the scale of the tax default, by the person concerned.
Amendments 82 and 83 look at the issue of a relevant tax penalty and what sort of activity should fall within that. It is an attempt to tighten this definition set out in clause 93(2). We are not wedded to any particular wording in this area, but we would like to explore the thinking here. There is a reasonable argument to be made that a new penalties regime has just come into effect, that this naming and shaming regime is being bolted on to it and that, at least in the initial months and years of this regime, it should be focused upon the very clearest cases of tax default, where we are looking at deliberate inaccuracy and concealment, rather than being broader. A criticism could be made of this regime that it is not focused as much as it might be, but I would put this in the context of a new regimewhy not start it off in a fairly narrow circumstance with a view to broadening it out?

Mark Todd: rose

David Gauke: I give way to the hon. Member, who is looking quizzical.

Mark Todd: I may have misunderstood the hon. Gentleman, but the thrust of his amendments appears to be to protect the privacy of those with very substantial net worth who may have significant tax liabilities on which they deliberately default. Am I right in thinking that that is the thrust of what he is attempting to do here?

David Gauke: I think that the concern that he is raising is with amendment 81, rather than 82. The concern behind amendment 81 is a relatively small error on the part of a large taxpayer. I suspect that the hon. Gentleman is going to make the point about deliberate inaccuracy, and, do not get me wrong, these are not people whom we are desperate to protect. None the less, this is a new regime coming in which is in addition to the existing penalties regime. If we are going to have something in addition to it, it is right to test the scope of it. In particular, the concern raised by outside bodies is that this new regime may be a bit broader than it should be in its initial stage. There is an argument for extending it as we see how it works. For most of us, a sum of £25,000 is a very considerable one, but not so in the context of a larger business. The point has been made by, I think, the Chartered Institute of Taxation, that a relatively small failure to account for tax on a transaction between a company and a director may involve additional PAYE, National Insurance contributions, VAT and tax under the beneficial interest rules and that these quickly accrue to a sum greater than £25,000.

Mark Todd: Surely the test is deliberateness, is it not? One would agree that honest errors are dealt with in a different way. Quite how one establishes deliberateness, other than by a paper trail showing that someone conspired to achieve this, is another matter, but that is the critical test.

David Gauke: Of the various levels of misbehaviour, the highest test is deliberate inaccuracy and concealment, and we are suggesting focusing on that because that is the clearest case of what, not to put too fine a point on it, most of us would consider to be of a fraudulent nature. Why not focus on the most egregious cases? Outside bodies argue that the measure is broader than it might be, so let us explore that.
The other amendments, which are less controversial, focus on the issue of publication and the circumstances in which publication should be made. Amendment 84 proposes that consent should be given by the chief executive of HMRC before information is signed off with regard to a tax defaulter. Again, this is partly a probing amendment. I hope that the Minister will be in a position to reassure the Committee that publication will occur only after a senior executive from HMRC has signed off these matters. Naming and shaming should not be a decision that is taken lightly.
Amendments 85 and 86 relate to the issue of a right of appeal. It is worth making the point that naming and shaming in this way is very much a penal action. It is likely to have a very significant effect on the reputation of the person being named and shamed. In the stand part debate, I hope that we will be able to examine in a little more detail the potential human rights angle to this and concerns about a breach of privacy. Clearly, in defending their case against an action brought on the basis of the Human Rights Act 1998, it will be helpful to the Government to have a satisfactory appeal mechanism. Clause 93, as currently drafted, does not seem to address that particular concern. It may well be that the Minister can give the Committee some reassurance on that particular point. The need for an appeal mechanism is addressed by amendments 85 and 86.
I have various broader points that I do not intend to go into at this stage, but we would be grateful for the Ministers response on a number of points that seek to ensure that clause 93 works as effectively as possible.

Sarah McCarthy-Fry: Welcome back to the Chair, Mr. Atkinson. Clause 93, as set out by the hon. Member for South-West Hertfordshire, provides for HMRC to publish details of deliberate tax defaulters. The clause has been introduced to send a clear signal that evading tax is wrong, to deter people from doing it, to reassure those who pay the right tax and to encourage those who do not do so to come forward and make good. Amendments 81 to 86 and Government amendment 305 all seek to ensure that clause 93 is closely targeted and that strong safeguards are in place. I should like to reassure the Committee that the Government support both those aims.
The clause relates to a deliberate intention to give HMRC inaccurate documents or not to meet obligations so as to gain a tax advantage. Careless errors or failures, whether or not penalised, will not trigger publication whatever their size, nor will taking a reasonably arguable view of the tax situation, even if it is not upheld. There will be exemption from publication for those who make a full disclosure of their defaults, either unprompted or prompted by HMRC. That means that everyone will have the chance to escape publication by coming forward and making good.

Mark Field: Although I am reassured that there has to be some deliberate intent, is there not a concern that powerful people with deep pockets and concern about their reputation and libel laws will be able to muscle their way in to ensure that their position is protected. Notwithstanding any Human Rights Act opportunities, it will be the less powerful who fall foul of the measure. The overwhelming concern is that individuals who realise the potential for reputational damage and the risk of going to courtthe cost and everything elsewill have an opportunity to ensure that officials are persuaded not to put them on a list, whereas the less powerful will be voiceless in that regard.

Sarah McCarthy-Fry: I do not agree with that premise. We will probably come on to that matter when we debate clause stand part. The clause will strengthen our ability to bring people who deliberately withhold information and default to account.

Peter Bone: Minister, is the problem not that there are normally two points of view to an argument? If the Revenue says, This is a deliberate error, the client will say, No, actually it wasnt a deliberate error. The Revenue will then go back to them and say, If you make a full confession now, we wont publish, but if you dont, we will name and shame you. My advice to the client would be to say, Even if you havent done wrong, accept a confession because your name wont be published. Is that not very unfair on the taxpayer?

Peter Atkinson: Order. Before I call the Minister to reply, I should say that this is moving into clause stand part territory. I would be grateful if the Minister answered the hon. Gentlemans question later.

Sarah McCarthy-Fry: I take your advice, Mr. Atkinson, and will answer that question when we come to the clause stand part debate.
Both amendments 81 and 82 deal with the criteria for publishing the names of deliberate tax defaulters. The Bill states that the deliberate understatement must be at least £25,000. Amendment 81 would change that to the greater of £25,000 or a certain percentage of the persons income, but it does not specify what the percentage could be. Two things are wrong with the amendment: it is wrong in principle and in practice. The Bill states that at least £25,000 of tax must have been understated. That is the amount of tax uncovered in an investigation, which may include more than one tax, more than one period and more than one type of deliberate default. A number of factors were taken into account in arriving at £25,000: international comparisons, sentencing guidelines for non-tax financial frauds and the need to send a clear message that tax evasion is wrong.
I think that most people agree that evading tax to that extent is a serious matter, whatever the level of income. There is no justification for taxpayers on higher incomes to be subject to different limits. To impose such limits would be wrong in principle and unfair. Taxpayers on higher incomes and large companies who evade tax should face the same consequences as others and, like any other taxpayer, they may avoid publication by making a full disclosure to HMRC, even when challenged. I also think that the amendment is technically flawed. The £25,000 limit relates to the tax lost. That might be a reference to income understated, as suggested by the amendment, but it could just as easily relate to understated capital gains, VAT or excise duty on goods misused. I urge the hon. Gentleman to withdraw his amendment on that basis.
Amendment 82 would narrow the scope of the scheme, so that it applies only to those whose defaults are both deliberate and concealed. However, clause 93 already ensures that publication is restricted to where a person knowingly and intentionally gives HMRC an inaccurate return or deliberately does not tell HMRC of a new taxable activity to gain an unfair tax advantage. Concealment, such as submitting false evidence to HMRC, is aggravating conduct and attracts a higher penalty. All deliberate understatements, whether involving concealment or not, are fraudulent. It is important to send a clear signal that all tax evasion is wrong, and consequently the £25,000 limit is a better restriction than using the deliberate and concealed category of the penalties.
Amendment 83 would reduce the scope of the scheme so that it covered only inaccurate documentsreturns, claims and accounts. It would exclude other forms of tax evasion such as deliberately supplying false information, causing a tax return to be inaccurate or, for example, knowingly supplying red diesel, which is subject to a lower rate of duty, to commercial haulage firms rather than for agricultural use as permitted. Each of the other categories specified in the Bill creates an illegal, unfair advantage for the perpetrator. Some categories, such as the misuse of red diesel, represent a significant attack on the tax system. It is estimated that £350 million is lost to the Exchequer each year from the illicit market in petrol and diesel. It is important that HMRC has the full range of tools at its disposal to combat such attacks. Those responding to HMRC consultations have consistently called for HMRC to come down hard on those seeking an unfair advantage. For that reason I cannot support amendment 83.
Amendments 84, 85 and 86 concern safeguards within the scheme. Amendment 84 would require the chief executive of HMRC to authorise publication of all details. Amendments 85 and 86 seek to create a separate appeal right against a decision by HMRC to publish details and to create a requirement to inform the person of their right to appeal. I want to emphasise and put it on the record that the Government agree that there should be robust safeguards. These are already built into the scheme and the penalty regimes on which it is founded. Government amendment 305 further strengthens the safeguards. There is a right of appeal to an independent tribunal against all the tax and penalty decisions that determine whether a name will be published. The criteria for publication are tight and are laid out in primary legislation. Everyone will have an opportunity to escape being named by making a full disclosure, even after challenge by HMRC. Taxpayers will be informed prior to publication and may make representations to HMRC that naming would not be appropriate. Names will be removed after 12 months. Both HMRC and I recognise the importance of getting this right. A senior HMRC officer and a central team separate from the investigators will be responsible for pre-publication checks to ensure that the details published are accurate. I do not think it necessary or practical to include such authorisation in the Bill.
We have concluded that a separate appeal right against publication is not appropriate for a number of reasons. There is an appeal right to the independent tribunal against all of the decisions that underpin publishing details: the amount of tax and penalty, the behaviour categorywhether the default was deliberateand the quality of the taxpayers disclosure. Government amendment 305 further strengthens taxpayer safeguards by ensuring that all considerations about disclosure, including its timing, will be taken into account when arriving at the penalty level and will be appealable. All of these appeal avenues must be exhausted or expired before details may be published. This leaves the only element of discretion within the publication scheme itself at the start of 93(1) which provides that
The Commissioners may publish information.
To ensure consistency and fairness, the presumption will be to publish where the criteria are met, unless there are exceptional circumstances after consideration of the taxpayers representations. Examples might include prejudice to an ongoing criminal investigation or risk of physical harm.
The appropriate route for a taxpayer to challenge such administrative decisions is directly with HMRC or by judicial review. Although amendments 85 and 86, as I have already said, would create a separate right of appeal, it is difficult to see what the grounds for such an appeal might be. An appeal against publication would also be a one-way bet, with the taxpayer having nothing to lose by appealing. We are concerned that tribunal resources would be unduly tied up with spurious appeals and the impact of this important deterrent effect would be undermined.
By contrast, Government amendment 305 reflects a small but significant change in policy in the taxpayers favour. It will reduce the extent of HMRCs discretion and provide greater clarity to taxpayers as to how they can avoid their details being published, namely by making a full disclosure, whether prompted or unprompted, which would qualify for the full reduction under the penalty legislation. That means that all consideration as to whether a taxpayers disclosure is sufficiently complete and timely to warrant exemption from publication will now be subject to appeal to an independent tribunal. That will be under the penalty appeal provisions. This strengthens taxpayers safeguards and addresses concerns underlying amendments 84 to 86. The amendment will also bring greater clarity for taxpayers about what they must do to escape publication. First and foremost, the message is not to evade tax in the first place but, if they have done so, taxpayers should come forward to HMRC swiftly and make good in full. One of the lessons learned from the Irish experience is the importance of having clarity and certainty in this area. The amendment should help to achieve that. The safeguards we already have in the Bill together with Government amendment 305 are robust and sufficient. I hope that I have managed to satisfy the concerns of the hon. Member for South-West Hertfordshire and would ask him to withdraw his amendments.

David Gauke: I thank the Minister for her response. She has dealt adequately with amendments 81, 82 and 83, and I accept her arguments. I may not have taken it in, but I am not sure whether she made a specific commitment on the signing off by senior staff.

Sarah McCarthy-Fry: A senior official.

David Gauke: I apologise to the Minister for not picking that up.
I am grateful to the Minister for acknowledging that all the amendments that we tabled attempted to make the provisions closely targeted or to ensure that they would work. I am grateful to the Government for amendment 305, which is an attempt to address the concern over the appeal process. I am not sure that I was persuaded by her argument about a taxpayer having the ability to appeal to HMRC or to seek judicial review. That is a very high test. However, I note her comments on the various opportunities that a taxpayer would have in the appeal process. I am not sure that the questions over that process are entirely resolved. However, I will not press the amendment to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Amendment made: 305, in clause 93, page 46, line 27, leave out from paragraph to end of line 36 and insert
10 of Schedule 24 to FA 2007, or
(b) paragraph 13 of Schedule 41 to FA 2008,
(reductions for disclosure) to the full extent permitted..(Sarah McCarthy-Fry.)

Question proposed, That the clause, as amended, stand part of the Bill.

Peter Atkinson: With this it will be convenient to discuss new clause 4Publication of taxpayer gold list
(1) The Commissioners may publish a list of taxpayers who, in the opinion of the Commissioners, have performed their tax paying and reporting obligations in an exemplary manner.
(2) The details of a taxpayer identified under subsection (1) shall be as agreed between the Commissioners and the taxpayer.
(3) In making an assessment of the inclusion of a taxpayer for publication under subsection (1), the Commissioners shall take into account the size and complexity of the taxpayers affairs.
(4) The Commissioners shall not refuse to list a taxpayer under subsection (1) on the grounds that
(a) the taxpayer has taken reasonable measures to minimise his tax liability, or
(b) the taxpayer, acting in good faith, is in dispute with HM Revenue and Customs.
(5) The Commissioners must publish guidance as to the criteria that shall be used in assessing whether a taxpayer should be identified under subsection (1).
(6) The Commissioners must consult with stakeholders before publishing any guidance under subsection (5)..

David Gauke: Let me reiterate that we share the Governments objective in clause 93 of having an additional sanction to take against those who deliberately do not pay the appropriate amount of tax. We welcome the use of social pressures in that context. It may be that the Government are waking up to the nudge agenda that is so popular among the Opposition. We also recognise that countries such as the Republic of Ireland have made use of this kind of regime. The objectives are worthy, but we have some practical concerns, many of which the Minister has allayed with the amendments that we have discussed.
I shall begin by asking where the naming and shaming measure came from. There was no indication prior to the Budget that the Government intended to do anything like this. When it has been considered in the past, the Government have been unenthusiastic about it. On 22 May 2002, the then Paymaster General, the right hon. Member for Bristol, South (Dawn Primarolo), stated in evidence to the Treasury Select Committee:
I have to say that I am not at all attracted to it because of naming and shaming incorrectly or the consequences and the balance with taxpayer confidentiality.
It would be helpful to know why the Government changed their mind. Why was there no consultation before this proposal was announced in a Budget notice?
This debate is similar to the one we had this morning on the new signing off requirements for senior accounting officers, because this measure appears to have emerged from nowhere. Has it been sitting on the back burner for years before being suddenly plucked out? Was it introduced because of changing economic circumstances and the crisis in the public finances? What caused the Government to bring it forward this year, when they previously had no interest in it?
I also raise the point about timing in the context of the new penalties provisions that have just been brought in. Given that we spent a great deal of time last year and the year before debating penalties, why was this measure not dealt with then? If it is something that the Government have come to relatively recently, was there any thought of holding it back, at least until we see how the new penalties regime works? It seems that the Government are somewhat open to the criticism of making policy on an ad hoc basis.
I seek some clarity from the Government. Presumably they have looked closely at the extent to which the naming and shaming provisions will actually be used. In implementing the new penalties regime, I believe that they looked at several dead cases to see how the new regime would have applied to them. Have they looked at those cases also in the context of clause 93 and the naming and shaming provisions? Do the Government have a view as to how many cases the provision will apply to in the course of a typical year? What scale of offence are we talking about?
The next area of concern relates to privacy implications, and I say this in the context of the Human Rights Act. I know that the Government are reluctant to reveal any legal advice that they have received, but the Chartered Institute of Taxation brief on the clause states:
We understand that HMRC have taken advice and consider that the right to privacy in such cases will not apply on account of the exception for economic wellbeing of the country given the current economic climate.
It would be helpful to the Committee if the Minister could say as much as possible about the legal advice on this matter. What concerns do the Government have that there is not a privacy issue, or at least not one that cannot be overcome, and is that on the basis of the economic circumstances?

Peter Bone: My hon. Friend raises an important issue. It would appear that the measure has been introduced only because we are in the depths of this terrible, Government-caused recession. Does that mean that it would disappear after a few years, or do the Government believe that we will be in recession for so long that it will not be a temporary measure?

David Gauke: My hon. Friend makes a good point.

Peter Atkinson: Order. Whatever the merit of the point, it seems to be wide of the clause.

David Gauke: Thank you, Mr. Atkinson. I accept that the Government-made recession is wide of the clause, but there is a legitimate question. If the human rights angle on privacy is overcome only because of the exception for the economic well-being of the UK, which is acute, given the crisis in the public finances, if that is rightthis is based on what I received from CIOTand if that is how the legal concern of privacy will be dealt with, what will happen if and when we are not in a public finances crisis?
My hon. Friend the Member for Wellingborough raises an interesting point about whether the legal analysis allowing the clause to exist will hold together only as long as we are in a crisis. He makes a good point, and there is all the more reason for the Minister to provide a little more guidance to the Committee about the basis on which the Government are confident that they will not run into any legal difficulties with the clause. If it is the case that the clause will work only for a few years and then the privacy issue becomes more acute, the Committee is entitled to know that.
In relation to privacy, outside bodies have raised concern with regard to the information that is provided about the tax defaulter, in particular the address. That sounds similar to a debate that we have had more generally in this House about the publication of addresses. Some people have raised concern that revealing that information may cause particular difficulties to, say, family members and so on. So I would be grateful to the Minister if she could give some guidance about how HMRC will use its discretionit has discretion in this areain the publication of addresses.
My hon. Friend the Member for Wellingborough touched on another interesting point a moment or so ago about the behavioural effect that the clause will have on individuals, in particular whether they are more likely to settle a case or fight on. I can see that matters could go in one of two directions. On the one hand, the clause could be a sanction that may encourage someone who has a dispute with HMRC to settle, for fear of being named and shamed. That was the concern that was raised by my hon. Friend. There is a particular concern in the context of technical disputes in which a party is acting in good faith and HMRC says, You must settle. I do not think that that is too great a concern, because we are talking about deliberate failure to pay. However, I am very keen to ensure that the clause is not used to put pressure on a taxpayer who has a legitimate and honest disagreement with HMRC. I do not think that that is a major concern, but perhaps the Minister could say a word or two on that issue.
Mr. Toddrose

David Gauke: I give way to the hon. Member for South Derbyshire. I have already acknowledged the point about deliberate non-payment.

Mark Todd: The hon. Gentleman has indeed acknowledged that point, and he has been gracious in giving way. Surely the point here is not just that the failure to pay must be a deliberate act. In addition, as the Minister acknowledged, if the taxpayer had an honest dispute and an arguable case, they would also not fall within the scope of the clause.

David Gauke: That is exactly the point that I am making; I want to ensure that honest disputes do not fall within the scope of the clause. So I do not think that the hon. Gentleman and I have any disagreement on that subject.

Robert Syms: I think that it would help the Committee if the Minister could give some indication of how many names are likely to be published. Are we talking about 10, 20, 50, 100 or 1,000 names? Also, as people who have been named might well end up in our surgeries, is there any kind of procedure to determine, for example, how many people in Poole will be named and shamed? I would just like to have some indication of what HMRC thinks the numbers will be.

David Gauke: My hon. Friend is absolutely right; indeed, I touched on that point a moment or so ago. Can the Minister break down her estimate on a constituency basis? I am sure that the good people of Poole will not be affected by the clause. However, my hon. Friend makes a very reasonable point.
The other point that I was going to make in the context of appeals goes in the opposite direction, as it were. Some taxpayers may be reluctant to settle when they might otherwise do so because they are afraid of being named and shamed, and if they bring finality to a dispute they will be more vulnerable to being named and shamed and might be more inclined to fight on. Presumably HMRC has considered whether that is likely. That concern has been raised by some outside bodies, and it will be helpful if the Minister lets us know whether she has any thoughts on the matter.
I also want to touch on an issue that the Minister raised during our previous debate on disclosure and protecting taxpayers. Have the Government considered providing a definition of unprompted disclosure in the Bill? That might provide additional clarity.
We have raised various issues in an attempt to probe the Governments thinking, but we recognise the benefits that may be gained from using social pressure to change behaviour. We tabled new clause 4 to start a debate on how to take that approach further. Clause 93 is the stick, but the new clause could provide the carrot. We are suggesting a published list of taxpayers who have performed their taxpaying and reporting obligations in an exemplary way. That list could be published with details to be agreed between HMRC and the taxpayer. The requirements would depend on the size and complexity of the taxpayers affairs, and inclusion on the list would not be prevented because of an honest and technical dispute. We would seek to provide some certainty about how that would work by requiring HMRC to publish guidance and to consult with outside bodies.
Will the Minister let us know whether the Treasury and HMRC are considering something similar? A gold list of companies that co-operate with HMRC, pay when they should do, are open when they should be, and provide information when they should do would be a useful and positive addition to HMRCs armoury. It is likely that large plcs and accounting practices would be keen to demonstrate to the outside world that they have exemplary tax processes and co-operate with HMRC. It would be a badge of honour to be on such a list, and that would encourage a culture of tax compliance. If the Government are not already doing so, we urge them to consider such proposals.

Peter Bone: I just want to go over a case from a few years ago, when I was advising a clientit was at the time of Customs and Excise, and before the combined service was createdwho had taken advice on the treatment of their turnover, which was partly overseas. They had followed that advice to the letter, but some years later, a different VAT inspector said that they were wrong and that they had been deceiving Customs and Excise, which proposed not only recovery of the VAT, but penalties. The new procedure benefited my client, who became entitled to a repayment overall. In their case, it was acceptable to say, Weve done it wrong, well accept penalties and, when we recalculate it, well actually get a refund of VAT. They were lucky. However, the managing director was livid because he had followed the advice of the original VAT inspector and was absolutely certain that he had done nothing deliberately wrong.
I always advise my clients to accept any liabilities and penalties, because the cost to the business of fighting them is far more than any penalty imposed. If someone overcomes that hurdle and says that they want to fight a case, the Revenue will name and shame, whereas if someone agrees that they have done something wrong, the only thing they end up with is a penalty.
I can see the Governments reasoning, but, in practice, I believe that more people will accept that they have done something wrong when they have not, and that they will not test the case, because being named and shamed will do enormous damage to their business. I understand what the Government are trying to do, but there are some practical difficulties.

Sarah McCarthy-Fry: It has been an interesting debate. On the stand part debate, we regard the clause as necessary and proportionate in relation to the response to serious non-compliance. The clause is carefully targeted and contains robust safeguards. It also sends a clear signal that evading tax is wrong, and will be a deterrent for people who are doing that.
The penalty regimes on which the publication is based were the subject of extensive public consultation, and respondents consistently supported HMRC taking a harder approach towards those who have deliberately flouted the rules. HMRC has already met with interested external representative groups about the publication scheme and will continue to do so up until 1 April 2010 to sort out the practicalities for implementation, including draft guidance. I emphasise that that will be introduced only for any penalties after April 2010.

David Gauke: I am grateful for what the Minister is saying, but does she not accept that, ideally, the consultation should be done and the guidance should be issued before, and not after, we legislate?

Sarah McCarthy-Fry: We are talking about a point of principle. A lot of the consultation that we have done has shown that people want HMRC to take a harder approach, and the provision is part of that.

David Gauke: I am sorry to interrupt the Minister before she has a chance to get going. I accept that the provision is part of a harder approach, but it is a different type of sanction from those previously implemented. I do not disagree that tough penalties are necessary; that is not our concern. This is a new type of penalty and we think that it is justifiable to use it, but, ideally, surely she agrees that, as far as this type of penalty is concerned, one should consult first, rather than produce something out of the blue and then begin the consultation process.

Sarah McCarthy-Fry: If we as a Government, the Committee and the House agree on a way forward on the issue that will help, and the consultation is ongoing as legislation makes its way through the House, I think that that satisfies our twin aims. We are trying to bring in a harder line while also ensuring that we bring stakeholders with us in the way that it is implemented.
The hon. Member for South-West Hertfordshire asked why, in 2005, the Paymaster General declared her opposition to naming and shaming, but there have been wider changes since 2005 and there is a worldwide move towards more robust regulation and responses to financial misconduct. Our recent reforms of the tax penalty regimes mean that it is now possible to create a scheme in law that is carefully targeted at the most serious offenders, which was one of the Paymaster Generals caveats at the time. As regards the Human Rights Act, I assure the Committee that HMRC has carefully considered all the issues in developing the publications scheme, and believes that it is, as set out in law, necessary and proportionate.
The hon. Gentleman took an extrapolation too far; it is a justifiable interference in the right to privacy to protect the economic well-being of the country and prevent crime, but that refers to the economic well-being of the country at any time. Tax evasion in general is a threat to the economic well-being of the country. We have carefully designed the scheme so that any interference with the right to privacy is kept to an absolute minimum, while still achieving its aims, which is why the law requires published details to be removed after 12 months.

David Gauke: The Minister is providing helpful clarity. The briefing that we received from CIOT was that the question of privacy did not apply due to the need to protect the economic well-being of the country, but in addition, it said:
given the current economic climate.
Can she assure the Committee that there was nothing in the legal advice that focused on the current economic difficulties and the state of the public finances and that this is a general requirement to address tax evasion.

Sarah McCarthy-Fry: I can certainly confirm to the hon. Gentleman that it is about the general economic picture and is not specific to current economic difficulties. Currently the names of those convicted for deliberate tax defaults are published, but those of people subject to a civil penalty for such defaults remain confidential. We are bringing the publication of the details of those subject to civil penalties for deliberate defaults into line with those convicted in a criminal court.
The hon. Member for Poole asked how many names were likely to be published. The measure is prospective and applies to penalties after 1 April 2010, so it is difficult to say. We expect the number published to be low initially, but it could be up to hundreds each year if people do not change their behaviour as a result of the measure. At this stage I cannot begin to think what the figures per constituency would be.

Robert Syms: When we talk about published, what do we mean? Do we mean put on the web? How do you remove a name from the web after 12 months? Are we talking about the London Gazette or will there be a press notice every quarter? Can we have a little more information about that please?

Sarah McCarthy-Fry: We can put such details in the guidance and consult further on them. It will be published in a way that meets the requirements of the legislation, so the names will be removed after 12 months. I take on board the hon. Gentlemans point.

Brian Binley: As Members of the House we have been subjected to a degree of innuendo that has been translated into an untruth by people out in the big wide world. What is to stop somebody taking the list for a given 12 months and using it for four or five years thereafter to create a situation of fear or of considerable embarrassment for people, when that should not happen? Are there any remedies that a person who has been on the list, but is then taken off might take to prevent that happening?

Sarah McCarthy-Fry: HMRC will put processes in place to ensure that names and details are removed. We anticipate publishing details on the website quarterly with a press notice. We will remove them from any official publications and from archived press notices. We are not responsible for whether details remain in the public domain in media outside our control, such as newspapers. That also applies to those who have evaded tax deliberately and are subject to the criminal rather than the civil procedure.

Mark Field: This is a pretty unsatisfactory state of affairs, as my hon. Friend the Member for Northampton, South points out. It is not simply a matter of having something on a particular website, because information gets transported to blogs and other websites. Other than through an extremely extensive and costly mechanism, it will not be possible to cleanse the entire web of references. Even with not particularly well-known people, a quick Google search will immediately bring up a range of blogs containing such details.
To return to my earlier point, more often than not, wealthy individuals will be able to bring libel cases against newspapers. If such a case is victorious, they will ensure that there is an ongoing cleansing of the web along those lines. For the less well-off, there will be no such safeguards.

Sarah McCarthy-Fry: I return to the point that we are not responsible for other media. The same applies to those people who have deliberately defrauded and are subject to criminal penalties. That is the same if cases are reported in the media. I think that we have the balance right in pushing this forward. We have the safeguard that the proposal covers only deliberate actions, which we have debated at length. Taxpayers will also have the opportunity not to have their name published if they make a full disclosure. I have explained umpteen safeguards as we have gone through this clause.

Mark Todd: I am puzzled by the turn of this debate because a large amount of activity through our minor courts ends up in the public domain and is then manipulated and used freely by other people for years to come. Minor county court judgments against people can become widely available. I am not sure why the thrust of this argument applies to this particular circumstance.

Sarah McCarthy-Fry: I think that we are spending a little too long on this point, given that most people agreed at the beginning that it was a good measure that would help in the fight against fraud and in changing peoples behaviour through deterrence.

David Gauke: Perhaps I can attempt to answer the point raised by the hon. Member for South Derbyshire. He is right that once something has been published, it is in the public domain. That brings into question the value of subsection (9), which states:
No information may be published (or continue to be published) after the end of the period of one year beginning with the day on which it is first published.
Although the information will be taken off the HMRC website, it will be in the public domain. I do not think that that is an enormous deal, but it brings into question whether subsection (9) is a worthwhile safeguard.

Sarah McCarthy-Fry: It is important because HMRC will take the information off that list. If there is subsequent referral to, that list was for that period of time.
There was a question about refraining from publication when there are security issues. As well as exemptions for those who make full and timely disclosure, HMRC will not publish names in exceptional circumstances in which doing so would not be appropriate. Taxpayers will have an opportunity to make representations.
I got a bit confused over the two conflicting arguments. One was that people would fight on, but not settle. The other was that people would not settle, but fight on. I think that we have sufficient safeguards in the clause to enable taxpayers to go through the appeal procedure, which means that whether their tax disclosure is sufficiently complete and timely to warrant exemption from publication will be subject to appeal to an independent tribunal. That strengthens the taxpayers safeguards.
New clause 4 would allow HMRC to publish a list of taxpayers whose record in paying tax and reporting their liability HMRC considers exemplary. I welcome the motives behind the clause and the implicit recognition that publication can affect taxpayer behaviour, whether it be publication of those who are exemplary or those who have deliberately defaulted. In many ways, new clause 4 is a mirror image of new clause 3. I share the view that an exemplary payment and reporting record is something to be encouraged.
Clause 93 reassures taxpayers that there is a level playing field. Under later clauses, we will examine how the Government propose to reform the penalties for late filing and late payment to change the behaviour of those who fall short of this high standard. We will also look at how the Government aim to make it easier for businesses and individuals to pay on time using managed payment plans. HMRC is continually reviewing its relationship with taxpayers, both large and small, to identify what motivates them to file accurately and pay on time, and what changes could be made to improve voluntary compliance.
There are some practical issues in the clause itself, which means that I must resist it today. HMRC consulted on the idea of a tax clearance certificate scheme in June 2007 and in November 2008. Such a scheme is similar to the aim of the new clause: an assurance that the taxpayer is in good standing with HMRC, because of the filing and payment record. I have to say that support for the proposal was lukewarm, with many unsure how the certificate would be used and seeing it as an additional level of bureaucracy. For example, the LITRG in their response said:
What will such a certificate be needed for? There is little point in introducing a system which lacks purpose, as this simply creates a burden of cost, administration and complexity.
In addition, we think there would be significant resource implications from the proposal and it might help if I gave the Committee a flavour of these. HMRC receives around 23 million returns each year across all the taxes. It collects around £450 billion, of which around two thirds is paid on time. Based on those figures, HMRC would be faced with a significant burden in potentially publishing the names of the many million taxpayers whose record appears exemplary. Such a lengthy list would be of little benefit to taxpayers if their details were buried away and might not influence the behaviour of others. Employees with simpler affairs, whose tax is all dealt with through PAYE, should, by rights, also be on the list and that would render it meaningless. Furthermore, what would exemplary mean in practice? A taxpayer might file their return on time and pay the liability shown on that return, but what if the figures on that return were simply understated? HMRC focuses its resources on high risk cases in order to deter non-compliance. However, it cannot know the risks in all cases and cannot check every return to find out more. Doing so would not only require much greater resources, but would also inconvenience many compliant taxpayers.
Publishing the names of people whom HMRC describes as exemplary, but who are known to others to be otherwise, could have a detrimental impact on voluntary compliance. The clause includes several areas where HMRC would have to exercise discretion: may publish, in their opinion and acting in good faith. As hon. Members know, safeguards have always been a key feature of our work to modernise tax administration. I should have thought that we would need to see some statutory safeguards here. For those reasons, I would resist new clause 4 and ask hon. Members not to press it. However, I repeat that we are sympathetic to the sentiment behind it and we will continue to look at the best way to encourage taxpayers to file and pay on time, and we will keep this suggestion in mind.

David Gauke: I thank the Minister for her remarks on clause 93 as a whole. I am not sure that she answered the concern about whether more taxpayers will fight on rather than settle. In my remarks, I stated that it could affect behaviour in two different directions. I welcome her comments that the intention of new clause 4 is correct, however, I am not sure that all her objections were particularly strong. There is a case for targeting it towards larger entities, so it would have a beneficial effect in the corporate area rather than on every individual taxpayer. I note her comments that the Government focus on the high-risk areas and do not necessarily dig in to ensure that the information provided is necessarily correct, but of course it is a further sanction available to the Governmentloss of gold list status would be something that a large company would be very reluctant to lose.
I acknowledge the point that there is more that can be done on safeguards in primary legislation. I hope that this clause will encourage HMRC to look further on this and to allow a debate to begin on this particular point. As I said, the measure would add value, particularly in dealing with larger companies. When we reach the relevant point, I do not intend to press new clause 4 to a Divisionalthough I think it would be a valuable addition to our armoury. I am pleased that the Minister appears to be suggesting that HMRC and the Treasury will continue to look at the matter.

Question put and agreed to.

Clause 93, as amended, accordingly ordered to stand part of the Bill.

Clause 94

Amendment of information and inspection powers

David Gauke: I beg to move amendment 87, in clause 94, page 47, line 11, leave out subsections (2) to (5).

Peter Atkinson: With this it will be convenient to discuss the following: amendment 88, in clause 94, page 47, line 19, at end insert
(3A) An order under this section may not
(a) remove or weaken a safeguard available to a taxpayer, or
(b) increase a penalty or HMRC power..
Amendment 61, in clause 94, page 47, line 22, leave out annulment in pursuance of a and insert an affirmative.
Amendment 62, in clause 95, page 48, line 2, leave out subsections (5) to (8).
Amendment 63, in clause 95, page 48, line 4, at end insert
(5A) An order under this section may not
(a) remove or weaken a safeguard available to a taxpayer, or
(b) increase a penalty or HMRC power..
Amendment 64, in clause 95, page 48, line 11, leave out annulment in pursuance of a and insert an affirmative.
Hon. Members may note that amendments 62 to 64 relate to clause 95. However, because they are identical amendments, it seems more convenient to debate them all together.

David Gauke: Thank you, Mr. Atkinson, for drawing the Committees attention to the grouping. That is helpful because essentially the same points are being made. Clause 94 relates to various amendments of the information and inspection powers brought in under schedule 47. Clause 95 relates to the extension of information and inspection powers to further taxes. I am sure that we will discuss briefly the contents of schedule 47 in a moment, but the concern raised by this group of amendments is that both clauses 94 and 95 are Henry VIII clauses that enable primary legislation to be amended by secondary legislation. Such measures are increasingly being used. Those of us who had the pleasure of serving on the Committee that considered the Banking Bill will remember the lengthy debates on that subject. This is perhaps not of a similar scale, but the concern remains the same.
Let us remember the context in which we are debating the Bill: again, it is a matter of balancing the powers of the state with the rights of the individual. That is an issue with which any liberal democracy has to wrestle. Again, I note that the Liberal Democrats are not present while we deal with that issue. When the new regime was brought in under the Finance Act 2008 in the context of information and inspection powers, the matter was debated in some length and in detail. The measure was set out in primary legislation, and rightly so.
In schedules 47 and 48, there are a number of amendments to what we debated in primary legislation. I suspect that we will not be detained for a great length of time in debating these matters, but, none the less, the measure was published in primary legislation and there was an opportunity for outside bodies to examine and comment on it. There is an opportunity for the Committee to give its view on the provisions, but clause 94(2) states that
The Treasury may by order make any incidental, supplemental, consequential, transitional or transitory provision or saving which appears appropriate in consequence of, or otherwise in connection with, Schedule 36 to FA 2008 or Schedule 47.
So those matters that we debated carefully last year can now be changed by secondary legislation. The issues that relate to the important balance between the powers of the state and the rights of the individual can now be changed by secondary legislation, and clauses 94 and 95 enable the Government to do so.
We are concerned about that. We do not see why those matters could not be dealt with by future clauses and schedules contained in future Finance Bills, and we therefore suggest a number of amendments. First, I want to look at clause 94, although the same amendments essentially apply to clause 95. Amendment 87 would delete subsections (2) to (5) of clause 94, which deal with this matter altogether. So schedule 47 will remain part of the Bill, but the power given to the Treasury to amend primary legislation by secondary legislation would be struck out.
If the Government can make a strong case against amendment 87, amendment 88 is more difficult for them to oppose. It would provide a safeguard in the Bill that
An order under this section may not
(a) remove or weaken a safeguard available to a taxpayer, or
(b) increase a penalty or HMRC power.
I believe that that is the Governments intention in this area, or at least as far as these orders are concerned. Perhaps some sort of reassurance to the Committee would be helpful. None the less, amendment 88 would at least provide some safeguard from misuse of clause 94.
Amendment 61 states that any statutory instrument in this area should be subject to an affirmative resolution as opposed to the negative procedure, which it is envisaged will apply. Essentially the same amendment applies to clause 95. Amendments 62 to 64 relate to the extension of information and inspection powers to further taxes.
It is incumbent upon the Minister to explain why it is necessary to have clause 94. What do the Government have in mind? Why can the matter not be dealt with in primary legislation? What scrutiny will exist as far as these provisions are concerned? I can see that there is an argument for administrative convenience. However, given that we are talking about quite important powers that HMRC may have and that potentially there will be a loss of some safeguards for the individual, we are reluctant to allow clauses 94 and 95 to remain unamended. We look forward to hearing the Ministers comments.

Ian Pearson: I was deeply disappointed not to be able to contribute to this mornings proceedings, Mr. Atkinson, so it is a great pleasure that I can serve under your wise suzerainty this afternoon. As you rightly point out, the group of amendments relates to clauses 94 and 95, which introduce schedules 47 and 48 respectively.
As the hon. Member for South-West Hertfordshire indicated, the group of amendments also relate to the powers introduced in schedule 36 to the Finance Act 2008. As he also rightly pointed out, those powers are part of a package of measures to align and modernise the various powers, deterrents and safeguards inherited by HMRC from the former Inland Revenue and Her Majestys Customs and Excise. We had a significant debate last year on these matters.
The powers in schedule 36 allow HMRC to check if the right tax has been paid or claimed in respect of VAT, income tax, capital gains tax and corporation tax. They came into force on 1 April.
It is right to say that last years debate focused on the need for proper safeguards. I believe that that debate was invaluable as it directed HMRC to the key issues that needed to be addressed in the guidance to staff. In turn, that has helped to ensure that the powers can be used appropriately and proportionately. I can report to the Committee that that guidance, along with associated training information, has now been published, following consultation with key stakeholders.
What we are trying to do as a Government is to ensure that there is a balanced approach to the way in which HMRC uses these powers. That approach has been warmly welcomed and I want to put on record my appreciation and that of the Chancellor and the Financial Secretary to those who have helped HMRC to develop it.
Both clauses contain a provision to make Treasury orders and consequentially to amend other legislation as a result of the powers in schedule 36. The intention is to repeal existing information and inspection powers when schedule 36 can be used instead, and to make other consequential amendments to avoid leaving overlapping powers in place. The hon. Gentleman said that these are Henry VIII powers, and I think he was referring to our debates on clause 75 of what was then the Banking Bill. Clearly, we are discussing something of a different order here.

Mark Field: The Economic Secretary referred to repealing. Does he mean simply repealing, or is there a suggestion that something in the clause could enact, by secondary legislation or otherwise, new offences under which taxpayers, whether errant or otherwise, could find themselves falling foul of the law?

Ian Pearson: I will cover those points as I discuss the amendments.
Amendment 87 would omit from the clause the whole of subsections 2 to 5, which contain the provisions to make incidental, consequential or transitional changes by Treasury order. That would mean leaving the legislation unclear and prevent a significant number of repeals. We do not believe that that would be right. The orders proposed under clauses 94 and 95 will enable the repeal of more than 30 pages of legislation containing powers that are no longer required. We believe that it is a good thing to repeal them.
Amendment 88 would insert provisions to ensure that an order under clause 94 would not remove or weaken safeguards or increase a penalty or HMRC power. I appreciate that it is a probing amendment, and I assure the Committee that the Treasury order provisions merely allow the repeal of legislation that is made redundant by the powers in the provisions, and consequentially to amend legislation as a result of those repeals or to take account of powers in schedule 36 to the Finance Act 2008, as amended by schedule 47 to the Bill. They will also ensure transitional arrangements for those repeals. Given the nature and scale of the changes, the broader power of amendment is needed to facilitate accurate consequential amendments to untangle a lot of old and complex tax legislation. I assure the Committee that orders will not be used to alter safeguards or the powers. Drafts of the proposed orders under clauses 94 and 95 are before the Committee and show that to be the case.
Amendment 61 would call for the provision to make orders under the affirmative procedure consequently to amend existing legislation and to repeal information powers that are no longer needed. The Opposition often raise that as a debating point. To make orders under the affirmative procedure would be contrary to normal practice for orders covering tax matters, which are usually made under the negative procedure. The consequential, transitional and incidental changes to be made under Treasury order, even to primary legislation, do not involve changes in policy and are simply tidying up, but they are essential to ensure that the law is clear. We believe that the negative procedure is appropriate because of the narrow scope and effect of the consequential changes that will be required, so there seems to be no sensible reason to make an exception to normal practice.
Amendments 62 to 64 would amend clause 95 in the same way as amendments 87, 88 and 61 would amend clause 96. The same reasons for resisting those amendments apply, and I invite hon. Members to resist them if they are pressed to a vote. It is important that, in clauses 94 and 95 and the associated schedules, we have an effective way of employing our tax legislation in this area. We have listened, and learned from the operation of schedule 36. We believe that we have the legislation right and that the proposed amendments are unnecessary.

David Gauke: I thank the Minister for his response. I note his comments that wanting to use the affirmative procedure is a point that Oppositions frequently make and that Governments equally frequently reject. I dare say that we may have that debate again at some pointperhaps with the parties taking different views.
The assurances the Minister has given the Committee have been clear. If there was an attempt to use the provisions contained in clauses 94 and 95 in anything other than the manner in which the power was used to appeal existing provisions to provide transitional rules and very minor consequential rules, the Minister would be in great difficulty, because his wording is very clear. I wonder why the provisions could not be more narrowly defined. Clause 94(2) is still pretty broad, and the protection contained in the Bill is fairly minor. None the less, every time such a clause is presented to a Public Bill Committee, it is valuable to highlight such matters and Ministers should be forced to give the kind of assurance that we have heard today. On the strength of that, I beg the Committees leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 94 ordered to stand part of the Bill.

Schedule 47

Amendment of information and inspection powers

David Gauke: I beg to move amendment 66, in schedule 47, page 345, line 35, leave out sub-paragraph (5).
I have only a very brief point to make. Concern was raised with us that new paragraph 21(9) in schedule 36 to the Finance Act 2008, inserted by schedule 47 to the Bill, is somewhat vague and adds nothing to the law. It states:
In this paragraph, references to the person who made the return are only to that person in the capacity in which the return was made.
Will the Minister explain what the wording is designed to do?

Ian Pearson: The amendment would remove paragraph 9(5) of schedule 47, which inserts a new sub-paragraph in paragraph 21 of schedule 36 to the 2008 Act. Paragraph 21 provided specific rules on how the information powers could be used in cases in which a self-assessment return had been submitted. The new sub-paragraph clarifies that the specific rules apply only in relation to checking the persons tax position in the capacity in which the tax return was made.
The provision is needed as there are people who are responsible for making returns in more than just their own personal capacityan example is a trustee who has filed a trust return, but has not filed their own personal return. As a result of the new sub-paragraph that the amendment seeks to remove, the legislation would not prevent HMRC from issuing a taxpayer information notice in relation to the individuals personal tax position. It would be wrong to leave the legislation so that the way in which one return could be treated was affected by the filing of another, unrelated, return. Without that provision, the legislation in schedule 36 would not work as originally intended and would remain unclear. The provision is concise, clear and helpful and should not be omitted.
It might help the hon. Member for South-West Hertfordshire and those who follow these proceedings closely if I explain that we are concerned only about cases where someone is required to make more than one tax return in different capacities. For example, the situation of an agent who submits tax returns for several clients would not be affected by the provision. I hope that is helpful, given the probing nature of the hon. Gentlemans amendment, in explaining why we need the power.

David Gauke: I am grateful to the Minister for that response and beg to ask leave to withdraw amendment 66.

Amendment, by leave, withdrawn.

Ian Pearson: I beg to move amendment 306, in schedule 47, page 348, line 11, leave out from person to the in line 13 and insert if
(a) it appears to an officer of Revenue and Customs that a counteraction provision may apply to the person by reason of one or more transactions, and
(b) .
The amendment is purely technical and corrects a drafting error in paragraph 12 of schedule 47. I could speak to it in more detail if hon. Members have questions but, in the light of its technical nature, I do not feel compelled to do so.

Amendment 306 agreed to.

Schedule 47, as amended, agreed to.

Clause 95 ordered to stand part of the Bill.

Schedule 48

Extension of information and inspection powers

Question proposed, That the schedule be the Forty-eighth schedule to the Bill.

David Gauke: The schedule deals with the extension of information and inspection powers to further taxes. My question relates to paragraph 5, which deals with the powers to inspect property for valuation. That is clearly a sensitive area, in that under those powers HMRC officers may enter private premises, accompanied by
any person who...is needed to assist with the valuation.
The safeguards are that an inspection can only be carried out with the agreement of the occupier, who has been given notice of the inspection in writing; or with the consent of the tax tribunal, when the occupier must still be given seven days notice in writing. I ask the Minister whether those safeguards are sufficiently robust, given that the power enables HMRC to enter a persons private residence.
In particular, I put to the Minister concerns raised with us that there should be a specific right for the recipient of the notice to be heard by a tribunal, if he or she wishes to object to access to the private premises. I also ask whether there should be a specific right of appeal in this area. It is a sensitive matter, as is always the case when the authorities are allowed access to private premises. I would be grateful if the Minister let the Committee know what representations he has received and whether any consideration has been given to additional safeguards.

Ian Pearson: The hon. Gentleman is right to say that the schedule contains a power to enter property for valuation purposes, which rationalises and aligns several existing powers. Schedule 36 of the Finance Act 2008 gives a power to enter and inspect business premises. However, it can be necessary in specific circumstances to value private premises or the assets on those premises. For example, the valuation of all types of property is an essential form of check for inheritance tax. The aligned valuation power contains significant extra safeguards that go beyond the current legislation. The legislation will now specify that valuation inspections can be carried out only with the agreement of the relevant person or the tribunal. The ability to visit unannounced has been removed. I am happy to clarify that.
During the consultation, the majority of proposals in the schedule were welcomed. Some respondents were concerned, however, that the involved third party power could be applied more widely; for example, to the beneficiaries of someone who had died. I can give reassurance that that is not the case. Specifying in primary legislation precisely where the power can be used means that if HMRC did wish to extend its scope, proposals would need to come before Parliament. I am happy to respond on that point.
Many respondents to the consultation noted the difference between inheritance tax and mainstream taxes. We accepted that and have removed the proposal for a record-keeping requirement for inheritance tax, which I know has been a bone of contention. That means that records created or kept solely for inheritance tax purposes will not be capable of being inspected. That has allowed us to respond to concerns that inspection visits might have been made to the vulnerable or bereaved at short notice. The schedule provides rights of appeal against information requests and flexibility for any part of the outstanding lifetime estate to be dealt with alongside the inheritance tax issues using the same legislation.
In general, the safeguards are much stronger. Powers already exist to ensure that there are safeguards to protect the taxpayer from misuse of the valuation power. All valuation visits to which the occupier does not agree will have to be authorised by the independent tribunal, which will ensure that the power is used only when it is necessary and proportionate to do so. I do not believe that a further appeal process is needed as we already have an independent tribunal that will have authorised the visit in the first place. I believe that we have gone a long way towards addressing all the concerns of respondents to the consultation.

Question put and agreed to.

Schedule 48 accordingly agreed to.

Clause 96 ordered to stand part of the Bill.

Schedule 49

Powers to obtain contact details for debtors

David Gauke: I beg to move amendment 67, in schedule 49, page 358, line 50, at end insert
(ba) Revenue and Customs has used all reasonable efforts to ascertain contact details of the debtor.

Peter Atkinson: With this it will be convenient to discuss the following: amendment 68, in schedule 49, page 359, line 24, at end insert
such period being not less than 30 days from the date of the notice..
Amendment 69, in schedule 49, page 359, line 27, after it, insert
does not have the information or that it.
Amendment 70, in schedule 49, page 360, line 22, at end insert

Application of data protection legislation
7A A third party who provides information to Revenue and Customs as a consequence of the powers contained in this Schedule shall be deemed to have acted in compliance with his responsibilities under data protection legislation..

David Gauke: The schedule relates to HMRCs powers to obtain contact details for debtors. I shall run through the amendments standing in my name and those of my hon. Friends.
Amendment 67 deals with the requirements relating to when a Revenue and Customs officer may reasonably request contact details for a debtor from a third party for the purpose of collecting a sum. It would simply require that Revenue and Customs must first use all reasonable efforts to ascertain the contact details of the debtor. In other words, it should check the information that it currently has. It is unreasonable for HMRC as a matter of course, as the first port of call, to go to a third party to ask for information which it may have. The amendment would simply require it to check its information first.
Amendment 68 relates to the requirements to comply with notices. Paragraph 3 of the schedule currently states:
If a notice is given to the third party under this Schedule, the third party must provide the details
(a) within such period, and
(b) at such time, by such means and in such form (if any),
as is reasonably specified or described in the notice.
We simply want a little clarity on the duration of that period by proposing a minimum period of 30 days from the date of the notice. It would be helpful if the Minister outlined what the Government have in mind for the duration of that period, but 30 days is not an unreasonable amount of time to respond to the notices.
Amendment 69 probes the grounds for a right to appeal. At the moment, such a right exists if it would be
unduly onerous to comply with the notice or requirement.
The amendment suggests that an additional ground should be stated explicitlythat the third party does not have the information. One could argue that if one does not have the information, compliance would be unduly onerous, in which case the amendment is unnecessary. The amendment might, however, provide a degree of clarity for third parties that receive such notices.
Amendment 70 would provide some protection for a third party that provides information to Revenue and Customs as a consequence of the powers contained in the schedule and that runs into difficulties with data protection legislation. The Minister may well be able to provide some reassurance that the amendment is unnecessary. We would welcome some reassurance that any third party acting in accordance with the provisions of the schedule would not face any data protection difficulties.
We have one other concern in relation to the schedule that I would like to put to the Minister. I should be grateful for your guidance, Mr. Atkinson, on whether I should mention it now or during the stand part debate. It is a brief point, and it might be to the convenience of the Committee if I address it now.

Peter Atkinson: I believe that others wish to speak, so it would be more convenient to save your point for the stand part debate.

David Gauke: Thank you, Mr. Atkinson.

Ian Pearson: I hope to be able to provide the assurances and clarification that the hon. Gentleman seeks. Amendment 67 would require HMRC to make all reasonable efforts to trace a debtor before using the formal power. I assure the Committee that HMRC will use that power only as a last resort in the most difficult cases, where it considers that all relevant checks have been made. For its own reasons of cost-efficiency and making progress, HMRC will make reasonable efforts from within its own resources, including the use of commercial products and informal requests, before concluding that there is no way forward other than to issue a formal notice. That is set out in HMRCs guidance, which has been published in draft form and supplied to the Committee. I therefore do not consider it is necessary to legislate on that matter.
Amendment 68 would put in statute a period of 30 days for the third party to comply. Again, for clarification, we recognise that that is a reasonable point to make, but I believe that it can be safely left to guidance. HMRC has published draft guidance stating that it will usually allow not less than 30 days for a reply. Although in most cases, 30 days would be long enough to provide simple information, such as an address that differs from that on a notice, in exceptional cases a longer or shorter period might be appropriate. HMRC wants the information, not the penalties, and will be open to representations to extend the period if particular requests cause difficulty. Leaving the time period in guidance is in line with schedule 36 to the Finance Act 2006, which operates in a similar way.
The probing amendment, 69, would allow the third party to appeal on the grounds that it does not have the information sought by HMRC. There is no need to appeal. Confirmation by the third party that it holds no contact details that differ from those provided by HMRC is enough to satisfy the notice. Again, that is set out in the draft guidance published by HMRC.

Brian Binley: I am concerned about vulnerable people who could be approached by the Inland Revenue for information. Will the Bill give leeway to the Department, for example in a situation in which an 80-year-old mother is the third party? Will there be some compassion over the whole business of application? What guidelines will be given to achieve that?

Ian Pearson: We have published extensive guidance through HMRC. HMRC tries to act compassionately in cases such as the hon. Gentleman describes. It is unlikely that an 80-year-old woman will have information that HMRC cannot secure through other means, but if she did, every effort would be made to secure that information in an appropriate way. We want the information, not the penalties. We want to work with people and believe that the system will be voluntary. The third parties that have such information are not likely to be 80-year-old women, but banks, other financial institutions, tax agents, landlords, letting agents and other professionals. There might be an octogenarian letting agent, but such circumstances will be rare.
I understand that third parties will want assurance that in providing the contact details, they will not be liable for the disclosure under data protection law. I do not consider that amendment 70 is necessary to achieve that. The clause will create the lawful means by which third parties can provide information to HMRC. The Data Protection Act 1998 states that when disclosing personal data, it must be lawful and fair to do so. This provision will provide that lawfulness.
HMRC considered statutory protection for the third party carefully in development and concluded that no further protection was needed. That view is supported by the Information Commissioners office, whose website includes published guidance on dealing with requests under tax legislation. It states that
if you are required to disclose personal information under HMRC legislation, it will not breach the Act,
meaning the 1998 Act. There is no comparable provision in other HMRC information powers and that has not caused problems to date. Many organisations already provide such information voluntarily when asked to do so. I am sure that they will continue to do so.
I recognise that the amendments are probing and hope that my assurances and clarifications will enable the hon. Member for South-West Hertfordshire to not press them.

David Gauke: The Minister is right that the amendments are probing. I am grateful for his responses and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed, That the schedule be the Forty-Ninth schedule to the Bill.

Alison Seabeck: It is a pleasure to speak for the first time under your chairmanship, Mr. Atkinson.
I have a brief query for the Minister to do with how the schedule relates to the Child Support Agency. It touches on the point made by the hon. Member for Northampton, South. The guidance suggests that Departments, friends, neighbours and relatives do not fall within the power, but where does the CSA come in all this? It is moving to a position where private contractors will do a lot of its work and debt collection, but it clearly holds an awful of information that would be of use to HMRC. I would welcome my hon. Friend the Ministers advice on where the CSA sits and whether HMRC can use the information the CSA holds and its expertise to pursue debt.

David Gauke: It is a pleasure to follow the hon. Member for Plymouth, Devonport. May I make a not entirely dissimilar point? Paragraph 1(3) states:
This Schedule does not apply if
(a) the third party is a charity and obtained the details in the course of providing services free of charge, or
(b) the third party is not a charity but obtained the details in the course of providing services on behalf of a charity that are free of charge to the recipient of the service.
As the hon. Lady rightly points out, there are similar provisions in relation to local authorities.
I should be grateful to hear what the situation is for those who are part of a non-charity not-for-profit organisation that provides assistance to people. One can envisage that certain organisations that might fall within that definition could well find themselves not receiving the protection contained in paragraphs 1(3) and 1(2). Has any consideration been given to broadening out the measure, for example, to volunteers who work for a local authority or non-charity not-for-profit organisation? In addition, has any consideration been given to extending that carve-out along similar lines to those suggested by the hon. Lady? Will the carve-out be too narrowly defined for some of the circumstances that could apply?

Ian Pearson: I thank my hon. Friend the Member for Plymouth, Devonport for her comments. In general, HMRC can obtain information from other Departments under the appropriate information gateways. The terms of those obviously vary, but HMRC will make use of such gateways before considering using this power. That could apply to the Child Support Agency, but I do not think that it necessarily applies under this specific clause. However, the Child Support Agency should be able to provide information to HMRC if it is needed for HMRC to perform its duties.
The hon. Member for South-West Hertfordshire raised the issue of whether charities should be excluded. Charities are excluded where they obtained the contact details in the course of giving free advice to the debtor. The exclusion also protects those who staff helplines on behalf of the charity, even if they are carrying on business elsewhere. The power will not be widely available and will be used only by specialist staff in the most worthwhile cases. HMRC will use the power only if there is or has been a business relationship between the debtor and the third party. I hope that clarifies the point for the hon. Gentleman. He also raised a point specifically about local government employees, and I think that might well depend on whether there is a business relationship.

David Gauke: I am concerned about the matter more in the context of not-for-profit organisations that might not be a charity, rather than in relation to charities. They do not appear to benefit from the protection contained in paragraph 1(3) and, indeed, I am not sure whether volunteers working for a local authority benefit from the protection contained in paragraph 1(2). Will the Minister say something specifically about that?

Ian Pearson: My understanding of the policy intention is that there should be a business relationship between the debtor and the third party. That is unlikely to be the case for not-for-profit advice given on the types of case that the hon. Gentleman is talking about. I give an assurance that HMRC will treat voluntary bodies that acquire addresses in the course of providing free advice to the debtor alike, whether they are a charity or otherwise. I hope that provides the reassurances that he seeks.

Brian Binley: May I press the Minister a little further?

Ian Pearson: No; I have sat down.

Brian Binley: What a pity.

Peter Atkinson: If the hon. Gentleman wants to speak in the debate, he can.

Brian Binley: No thank you, Mr. Atkinson.

Question put and agreed to.

Schedule 49, as amended, accordingly agreed to.

Clause 97 ordered to stand part of the Bill.

Schedule 50 agreed to.

Clause 98 ordered to stand part of the Bill.

Schedule 51 agreed to.

Clause 99 ordered to stand part of the Bill.

Schedule 52

Recovery of overpaid tax etc

David Gauke: I beg to move amendment 71, in schedule 52, page 377, line 23, leave out , or ought reasonably to have known,.
Let me say first that this schedule addresses the recovery of overpaid tax. Amendment 71 deals with those circumstances where the commissioners are not liable to give effect to a claim if particular circumstances apply; there is a list of those circumstances in the Bill. Specifically, amendment 71 relates to cases where the claimant
could have sought relief by taking such steps within a period that has now expired, and knew, or ought reasonably to have known, before the end of that period that such relief was available.
The particular words that we have concern with are:
or ought reasonably to have known.
Essentially, this is an objective test that may exclude from claims those taxpayers who should have realised that they had an opportunity to act but did not do so. Consequently, the people most likely to be affected by this particular provision are the less sophisticated and unadvised. They may well be caught by this restriction and would therefore not be able to recover overpaid tax. I would be grateful if the Minister explained why that is justifiable. For the sake of completeness, the ought reasonably have known test applies in one other place in this schedulein paragraph 2(6). I will turn to that in a brief stand part debate, but I would be grateful if the Minister explained the purpose of the objective test in these circumstances.

Sarah McCarthy-Fry: The provisions are intended to provide a final opportunity for taxpayers to reclaim overpaid tax. They modernise a system originally enacted in 1923, which has increasingly been criticised by the courts as anachronistic and inconsistent with a rights-based culture. The provisions simplify the recovery of overpaid income tax, capital gains tax and corporation tax by providing taxpayers with a single route of claim. Claims will be possible only if no other statutory steps can be taken to reclaim an overpayment. External commentators have recognised that that is an area of law that would benefit from clarification. The proposed changes have been exposed informally to external stakeholders, who responded positively to them.
Amendment 71 would widen the scope for taxpayers to make claims still further by relaxing the restrictions relating to matters that the claimant could have appealed. However, taxpayers are already entitled to make a late appeal if they have a reasonable excuse for not having appealed within the normal time limit. The tribunal also has discretion to permit a late appeal when it is fair and reasonable to do so, and HMRC has discretion to allow late claims, elections and notices when appropriate, and to give full effect to the consequences of the claim. The amendment would enable taxpayers to reopen a matter that could have been dealt with on appeal, when they do not have a reasonable excuse for failing to appeal in time and when the tribunal does not consider it fair and reasonable to allow a late appeal. The amendment goes too far and would compromise the effectiveness of the appeal process as a means of determining disputes, so I ask the hon. Gentleman to withdraw it.

David Gauke: I note the Exchequer Secretarys comments on the appeal process when a taxpayer has a reasonable excuse. That provides some comfort, but there is concern with such a testwe have seen it elsewherethat it may leave the unadvised, least sophisticated taxpayer in a difficult position. I am sure that the Government and HMRC are aware of that, and that it is a legitimate concern to raise. I accept the point about the practical difficulties if the exclusion were widened too much, and I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Question proposed,That the schedule be the Fifty-second schedule to the Bill.

David Gauke: I want to highlight two other areas where the commissioners are not liable to give effect to claims. One is paragraph 2(6) of new schedule 1AB to the Taxes Management Act 1970, which is another occasion when the ought reasonably to have known test applies. The other is paragraph 2(7), which requires a little clarity, and refers to case F, which
is where the amount in question was paid or is liable to be paid
(a) in consequence of proceedings enforcing the payment of that amount brought against the claimant by
HMRC, or
(b) in accordance with an agreement between the claimant and
HMRC
settling such proceedings.
I think that seeks to prevent claims from being made when HMRC has begun proceedings to recover tax debtsfor example, when tax was due under self-assessment. We have been advised that that is likely to have quite a wide effect, and that quite a large number of taxpayers will be excluded as a consequence of the provision. I should be grateful to hear from the Minister whether that interpretation is correct, and whether this is quite a significant carve-out.

Sarah McCarthy-Fry: As I said, the schedule changes the error or mistake rules for repayment of overpaid income tax, capital gains tax and corporation tax. Error or mistake relief is intended to provide a final opportunity for taxpayers to reclaim overpaid tax. The changes modernise the system and simplify the recovery of overpaid income tax, capital gains tax and corporation tax. The provisions widen the relief, and the requirement that the tax must have been paid on the assessment as a result of a mistake on a return is removed. Claims will not be possible unless there are no other statutory steps that can be taken to reclaim an overpayment. Taxpayers safeguards are improved, and aligned more closely with the indirect tax error correction provisions, which cuts burdens for taxpayers and HMRC.
After a transitional period to enable claims to be made under the previous regime, the changes will apply to claims made on or after 1 April 2010 and repayment claims will be subject to the ordinary four-year time limit. As I said earlier, the proposed changes have been exposed informally to external stakeholders, who responded positively.
The hon. Member for South-West Hertfordshire asked a specific question that I do not have the answer to, but I am more than happy to write to him.

Question put and agreed to.

Schedule 52 accordingly agreed to.

Clause 100

Late payment interest on sums due to HMRC

Question proposed, That the clause stand part of the Bill.

David Gauke: I have a question about subsection (9), which states:
For the purposes of this section any reference to the payment of an amount to HMRC includes a reference to its being set off against an amount payable by HMRC (and, accordingly, the reference to the date on which an amount is paid includes a reference to the date from which the set-off takes effect).
How will interest be assessed when setting off? If the amount is to be treated as paid when the offset takes effect, it appears that if HMRC delays making the set-off, the taxpayer may incur an additional interest charge because of the differential in the interest rates that apply. When the taxpayer owes money, a higher interest rate applies than when HMRC owes money to the taxpayer. Consequently, if there is a delay in the date of setting off, it is to the financial advantage of HMRC and, correspondingly, to the financial disadvantage of the taxpayer. The concern has been put to us that subsection (9) gives HMRC more flexibility than it should have in determining the date on which the set-off takes effect. I should be grateful for the Ministers assurance that the clause will not be used to leave taxpayers out of pocket.

Sarah McCarthy-Fry: In the Finance Act 2008, the Government introduced legislation covering the set-off of sums that HMRC must repay against debts it is owed. Setting off reduces the administrative cost to both parties by cutting down the number of unnecessary transactions. A creditors right to set off mutual debts is founded in common law and enshrined for HMRC taxes in section 130 of the Finance Act 2008. Under common law, such liabilities are not discharged until payment is made, whether by circulation of actual cash or cheques, or by an appropriate adjustment in the creditors books. Clause 100 sets out clearly that both late payment and repayment interest runs until the amount is repaid and the date of payment is the date on which any set-off takes effect. I assure the hon. Member for South-West Hertfordshire that HMRC always seeks to make repayments promptly.

Question put and agreed to.

Clause 100 accordingly ordered to stand part of the Bill.

Schedule 53 agreed to.

Clause 101 ordered to stand part of the Bill.

Schedule 54 agreed to.

Clause 102

Rates of interest

Question proposed, That the clause stand part of the Bill.

David Gauke: I rise not merely to note that we have managed to make it into triple figures, but to ask the Minister a question that relates to the issue of differential rates that I raised under clause 100. As I understand it, those who owe money to HMRC pay a higher rate of interest than HMRC pays taxpayers to whom it owes money. Does the Minister have any figures on the benefit to the Exchequer of those differential rates? What is the policy on interest rates here? In a period in which interest rates are low, has any consideration been given to setting a minimum interest rate for taxpayers owed sums of money, and where does the Exchequer Secretary see the policy on interest rates going forward?

Sarah McCarthy-Fry: The clause is a further part of the package of provisions that will create a new harmonised interest rate regime. It creates the vires for secondary legislation to be made that will set the rates of interest to be charged and paid under the new regime. Regulations will provide for a harmonised interest rate that is aligned across the taxes and offers both transparency and consistency in approach. Government estimates of the potential difference between what is currently charged and paid and future amounts under the new regimes show a negligible difference in the years scored until 2012-13. The aim is not to raise revenue but to offer a regime that is based on recompense, fairness and simplicity.
The regulations will also provide for rates that will apply to interest charged on late-paid taxes and paid on overpayments. The rates themselves will track all changes in the Bank of England base rate, with one rate charged on late-paid taxes and a further rate paid on overpayments. Rate changes will apply 13 days after any rate changes announced by the Monetary Policy Committee, to allow for systems to be updated with the new rate. The two rates will apply to all taxes with the exception of those companies paying under the quarterly instalment payments arrangements, which will continue to have their own rates. Basing the harmonised interest rates on the Bank of England base rate was warmly welcomed by respondents to the consultation process as it offered a transparent basis for setting the rate that could be clearly understood by taxpayers. Regulations will also provide for the setting of a repayment interest floor of 0.5 per cent. That is intended to ensure that even when the Bank of England base rate reaches zero, the rate of repayment interest paid by HMRC will never reach zero.
The Government also intend to make regulations under existing powers that mirror the new harmonised rates, following Royal Assent, in order to align existing rates until full harmonisation of the regimes begins. The clause forms an important part of the provisions needed to introduce a new harmonised interest regime that will bring benefits to taxpayers, their advisers and HMRC. The clause itself will provide for rates that are set in a transparent way, are clearly based on recompense and are fair and simple to understand.

Question put and agreed to.

Clause 102 accordingly ordered to stand part of the Bill.

Clause 103 ordered to stand part of the Bill.

Clause 104

Miscellaneous amendments

Sarah McCarthy-Fry: I beg to move amendment 307, in clause 104, page 52, line 17, at end insert
( ) In the following provisions, for the words from the same rate to the end substitute the rate applicable under section 178 of the Finance Act 1989
(a) section 48(1) of FA 1975 (interest on repayment of estate duty), and
(b) section 235(1) of IHTA 1984 (interest on overpaid inheritance tax).
( ) In section 178(2) of FA 1989 (setting of rates of interest)
(a) after paragraph (g) insert
(ga) section 48(1) of the Finance Act 1975,, and
(b) in paragraph (k), after sections 233 insert , 235(1)..
This amendment and the clause to which it relates make changes to the existing interest regime, setting the scene for the long-term introduction of interest harmonisation. Subsections (1) to (3) bring the due dates for the withdrawal of any income tax relief under the enterprise investment scheme in line with the due date for income tax. The removal of that difference will provide greater consistency and certainty for taxpayers.
Amendment 307 introduces two new subsections to this clause after subsection (3). The amendment is required to ensure that interest is charged and paid on estate duty and inheritance tax at the same rates as interest for other taxes. We announced at Budget 2009 our intention to align interest rates where interest is currently charged and paid, with a differential between the rate charged and paid, after the Bill receives Royal Assent.
However, the existing legislation provides that repayment interest for inheritance taxes should be paid at the same rate as interest charged on late payments. The amendment removes that anomaly and will ensure that rates charged and paid can be harmonised across taxes. Those responding to the consultation on the new interest harmonisation proposals were in favour of harmonising rates across taxes and the majority also recognised the need to have a differential between the rate charged and paid.
These changes reflect the same principles used for interest harmonisation and as such provide recompense, fairness and simplicity. I urge the Committee to accept the amendment.

Amendment 307 agreed to.

Clause 104, as amended, ordered to stand part of the Bill.

Clause 105

Penalties for failure to make returns etc

Question put, That the clause stand part of the Bill.

David Gauke: I rise to speak to clause 105 but it could be clause 106 because my question relates to their interaction. A penalty is chargeable for both failure to make a return, under clause 105, and failure to pay tax, under clause 106. Concern has been put to us that there is an issue of double charging in a failure to make a return and failure to pay tax due on the same return. This point was considered during consultation, with HMRC concluding that two distinct penalties are required in order to encourage both payment and filing on time. It appears, however, that there is scope for taxpayers to be charged penalties of more than 100 per cent. of the tax due, in the event that a return is not filed within 12 months and payment is delayed by the same period.
The concern is that this will impact most significantly on the unrepresented taxpayer who is not aware of his obligations. I know that HMRC has indicated in consultation that work is ongoing to ensure education and support for those taxpayers but there are no safeguards in the Bill. I would be grateful if the Economic Secretary reassured the Committee about how these two separate penaltiesfor late filing and late paymentwill interact. I also ask him, with regard to clauses 105 and 106, to say a word or two about implementation of the regime. I understand that HMRC has indicated in consultation that the regime will be introduced by statutory instrument on a staged basis, with the first area to be addressed being late returns and late payment of PAYE through the year. The intention is that it will be applied to the worst offenders first, on a risk-assessment basis. There is no provision in the legislation to enable such an approach to be taken. Clearly, HMRC has not laid out its approach in primary legislation, but perhaps the Minister might say a word or two about how the provisions made under clauses 105 and 106 are to be implemented.

Ian Pearson: The clause introduces schedule 55, which provides for penalties for late filing of tax returns. I appreciate the point raised by the hon. Member for South-West Hertfordshire and the fact that he might have raised it under clause 105 or 106, or perhaps at other opportunities. It enables the Treasury to make an order to bring into force the whole schedule or parts of the schedule for specified circumstances. It also allows the Treasury to make incidental, supplemental, consequential, transitional, transitory or saving provisions by order, as appropriate, to give proper effect to the schedule. The hon. Gentleman asked about the interaction of penalties in the Bill. Any tax-geared penalty is reduced by any other tax-geared penalty charged by reference to the same amount of tax.
Safeguards outlined in the legislation include a right of appeal to an internal review and an independent tribunal against all penalties; a common legislative formulation of reasonable excuse, aligned across taxes, which is similar to that devised for penalties in the Finance Act 2008; provision in law for reduction of penalties in special circumstances not otherwise covered; and improved accessibility to appeals by specifically ensuring that penalties do not need to be paid in advance of any hearing.
The hon. Gentleman also raised the question about implementation and why it is not in the Bill. As he is aware, these are major changes which we believe are most appropriately introduced sequentially. He referred to the fact that we will take a risk-based approach. Implementation does need to consider HMRCs capacity and resource issues. Also, introducing change too quickly for taxpayers and their advisers could be problematic. We want to make progress, and the hon. Gentleman will be aware of the broader package of reforms that are being introduced. We think that we are getting the balance right in this area. If he has any further points that he wants to make on the schedule or on clause 106, I will happily address them.

Question put and agreed to.

Clause 105 accordingly ordered to stand part of the Bill.

Schedule 55

Penalty for failure to make returns etc

Ian Pearson: I beg to move amendment 308, in schedule 55, page 400, line 30, after P, insert first.

Peter Atkinson: With this it will be convenient to discuss Government amendments 309 to 311.

Ian Pearson: Amendments 308 to 311 relate to paragraph 13 of schedule 55, which provides for fixed sum penalties incurred by persons who fail to make a first construction industry scheme return by the due date to be capped at £3,000. The purpose of the cap is to prevent disproportionate results from an accumulation of fixed sum penalties if someone is late joining the CIS, which has monthly return filing obligations. The cap is a response to concerns expressed about the current CIS penalty regime, and the four amendments are designed to ensure that the taxpayer protection works as intended. It is more generous than what was in the Bill as originally published, and I believe that it has been welcomed by the industry.
Amendment 308 makes it clearer that the provision applies only during periods starting from when a person should have made the first return under the CIS, so a person who has been making returns in the scheme for several months and then stops making returns, even for a prolonged period, would not be subject to the cap.
Paragraph 13 of the schedule caps only the fixed sum penalties but does not restrict tax-geared penalties, even if they are the minimum value of £300, where no payment is due. Therefore, for those who have very small or nil liabilities, but who still need to make a CIS return, the protection of the cap was not as generous as intended by the Government. Amendments 309 and 310 disapply the minimum value of £300 for the tax-geared penalties where the cap applies.
Amendment 311 defines more clearly the circumstances in which the cap applies. It does so by refining the definition of earlier return to be those with a filing date earlier than when a first return is made, rather than when it is due to be filed. It corrects a technical deficiency in the drafting.
I believe that the amendments have been welcomed by industry and therefore ask the Committee to accept them.

Amendment 308 agreed to.

Amendments made: 309, in schedule 55, page 400, line 34, leave out P is not liable.
Amendment 310, in schedule 55, page 400, line 35, after applies insert
(a) paragraphs 10(2)(b) and 11(5)(b) do not apply, and
(b) P is not liable.
Amendment 311, in schedule 55, page 400, line 37, leave out from first the to end of line 38 and insert
date on which P first made a return. (Ian Pearson.)

Schedule 55, as amended, agreed to.

Clause 106 ordered to stand part of the Bill.

Schedule 56

Penalty for failure to make payments on time

Ian Pearson: I beg to move amendment 312, in schedule 56, page 406, line 38, column 3, leave out from Amount to end of line 41 and insert
charged in an assessment under paragraph 11(1) of Schedule 2 to OTA 1975.

Peter Atkinson: With this it will be convenient to discuss Government amendments 313 to 320.

Ian Pearson: The amendments correct a technical deficiency in schedule 56 that could lead to participators in the petroleum revenue tax regime being liable to penalties for late payment from the wrong date. The amendments align the date that a participator will become liable to a penalty with the other taxes in the table in schedule 56.
Our intention is that for all annual and occasional taxes, including PRT, the penalty date for principal amounts of tax will be 30 days after the due date for payment. If extra tax comes into charge after the due date, the taxpayer should become liable to a penalty only if they fail to pay within 30 days of the due date for the additional tax. The only exception to that is if the taxpayer has failed to submit a return where the penalty date should be the original due date for the tax. That is to ensure that taxpayers do not gain an advantage by avoiding their filing obligations.
The amendments ensure that the new penalties will operate as intended, and I hope that the Committee will accept them.

Amendment 312agreed to.

Amendments made: 313, in schedule 56, page 407, line 7, at end insert
 15A
Petroleum revenue tax
Amount charged in an assessment made where participator fails to deliver return for a chargeable period
The date falling 6 months and 30 days after the end of the chargeable period.
Amendment 314, in schedule 56, page 407, line 9, column 2, leave out or 9 to 11 and insert , 9 or 10.
Amendment 315, in schedule 56, page 407, line 38, at end insert
 20A
Petroleum revenue tax
Amount charged in an assessment, or an amendment of an assessment, made in circumstances other than those set out in items 11 and 15A
The date falling 30 days after (a) the date by which the amount must be paid, or (b) the date on which the assessment or amendment is made, whichever is later.
Amendment 316, in schedule 56, page 407, line 40, column 2, leave out or 9 to 11 and insert , 9 or 10.
Amendment 317, in schedule 56, page 407, line 44, column 3, leave out or 9 to 11 and insert , 9 or 10.
Amendment 318, in schedule 56, page 407, line 45, column 2, leave out or 9 to 11 and insert , 9 or 10.
Amendment 319, in schedule 56, page 408, line 4, leave out 11 and insert 10.
Amendment 320, in schedule 56, page 408, line 31, at end insert or (c).(Ian Pearson.)

Schedule 56, as amended, agreed to.

Clause 107

Suspension of penalties during currency of agreement for deferred payment

Question proposed, That the clause stand part of the Bill.

Ian Pearson: I do not want to pass clause 107 without commenting briefly on what it will do. The clause will ensure that penalties and surcharges for late payment of tax will not be charged to those who anticipate temporary payment difficulties and contact HMRC before the penalty or surcharge becomes due. They will be able to agree a time to pay their tax.
I am enormously proud that as a Government we have provided real help to companies in financial difficulties. Since 24 November 2008, when the HMRC business payment support package was introduced, we have agreed time to pay for more than 130,000 businesses, helping them to defer more than £2.6 billion worth of tax. The clause will help HMRC to support businesses with temporary payment difficulties. I wanted to note it because it is an important clause.

Question put and agreed to.

Clause 107 accordingly ordered to stand part of the Bill.

Clause 108 ordered to stand part of the Bill.

Schedule 57 agreed to.

Clause 109

Recovery of debts using PAYE regulations

Question proposed, That the clause stand part of the Bill.

David Gauke: The clause and schedule 58 relate to the recovery of debts using PAYE payments. The provision enables HMRC to collect small debts of no more than £2,000 across all the taxes it administers from taxpayers through the PAYE system. The provision specifically excludes HMRC from using the PAYE system to collect debts in respect of tax credits or any debts due from an employer during the current tax year. Regulations can be made through secondary legislation to effect the proposal.
It is intended that the provision will be used by HMRC as a last resort in the event that a debt cannot be paid in full or through a time to pay arrangement. I would be grateful if the Minister confirmed that the provision is a last resortthere is no specific safeguard in the legislation or in PAYE regulations to say that that is the case. Currently, small sums relating to self-assessment liabilities from previous years are collected through the PAYE system on a regular basis.
Given that £2,000 is a large sum for many taxpayers, it would be appropriate to have some form of statutory safeguard in the regulations, such as a referral to a more senior officer, to ensure that the mechanism is utilised only as a last resort. I would be grateful if the Minister provided assurances that regulations will reflect that, or at least that the provisions of the clause and schedule 58 will not be used as a routine method of collecting small debts.

Ian Pearson: The clause introduces schedule 58, which allows HMRC to collect certain debts owed to it through the pay-as-you-earn system. HMRC faces a particular problem with small debts, which represent a large percentage of what it is owed by volume, but only a small percentage by value. That makes its traditional methods of enforcementgoing to court to obtain judgment or seizing goods to sell at auctionincreasingly less cost-effective. Those traditional methods can cause the debtor stress and extra expense. The clause allows HMRC to use the PAYE system it administers to collect small debts over time. Doing so reassures compliant taxpayers by ensuring that tax debt is pursued, while offering debtors an easy way to spread their payments.
The hon. Member for South-West Hertfordshire asked whether such matters can be appealed on grounds of hardship. The PAYE coding rules are designed to prevent hardship being caused through excessive deductions, either on a single pay day or through the year as a whole. If a taxpayer feels that a coding change will cause hardship, they should object by contacting HMRC immediately. HMRC also offers help to older people, those with disabilities, people on low incomes and those from diverse backgrounds, in a variety of ways as part of its day-to-day work. It recognises the need for clear and strong communications with those groups, and talks regularly to voluntary groups, including TaxAid and the Low Incomes Tax Reform Group, about problems faced by particular groups of debtors, such as the financially vulnerable. I understand that some hon. Members representations come from that source.
Moving on to statutory safeguards and limits on how much can be coded out, the amount that can be coded out will remain subject to the normal limits, which prevent excessive deductions. The limits are £2,000 a year or 50 per cent. of gross taxable income. The £2,000 is in the clause and the 50 per cent. is in the existing PAYE regulations. That gives important safeguards.
As the hon. Member for South-West Hertfordshire is aware, my right hon. Friend the Financial Secretary has written to the Committee about the order-making powers, which I hope provides clarification.

Brian Jenkins: Just for clarification, when the Minister says 50 per cent., does he mean 50 per cent. of income or 50 per cent. of income less national insurance contributions? What is the tax take? How much income do such people have left?

Ian Pearson: My understanding of the safeguards is that the limits are £2,000 a year or 50 per cent. of gross taxable income. As I explained, the £2,000 figure is in the clause and the 50 per cent. figure is in the current PAYE regulations. I do not believe that the regulations have caused problems for those who comment on such tax matters.
I hope that I have been able to address the points that the hon. Member for South-West Hertfordshire raised.

Question put and agreed to.

Clause 109 accordingly ordered to stand part of the Bill.

Schedule 58 agreed to.

Clause 110

Managed payment plans

Question proposed, That the clause stand part of the Bill.

David Gauke: A moment ago the Minister referred to representations received from the Low Incomes Tax Reform Group during the passage of the Bill. I rise to raise points from that group on managed payment plans.
Clause 110 is welcome, but I have a few questions about its details. The clause gives HMRC the ability to set out further requirements for managed payment plans in regulations. However, it appears that much of the detail will be set out in non-statutory guidance, a draft of which has been published and is on the HMRC website.
In the original consultation document, HMRC proposed to limit MPPs to payment by direct debit and to online filers. Following representations from the Low Incomes Tax Reform Group, HMRC offered the following points of reassurance in its consultation response, both of which are vital for low income taxpayers to take advantage of MPPs. First, HMRC said that it was:
exploring other methods of payment for MPPs (ie not limiting them to direct debit) and have agreed to accept standing orders.
Secondly, HMRC said:
Paper tax return filers will be allowed to set up MPPs.
The draft guidance appears to cover both these points. It confirms that HMRC will accept both standing orders and direct debit, but suggests that direct debit is preferred, one of the requirements being to:
Make payment by Direct Debit or Standing Order. HMRC will need some assurance that payments will be made at a precise time and be posted to the correct record, and this is best achieved through Direct Debit.
Can the Minister give some indication of what information will be sought from those people who use standing orders? The LITRGs concern is that such people will be pressured into agreeing to a direct debit. It would be helpful if the Minister outlined what HMRCs policy will be in those circumstances.
Another concern that the LITRG has mentioned to us is that paper filers will also fare worse than those filing online. Again, the LITRG quotes from the draft guidance, which says:
Those who cannot file online, or do not wish to do so, will still be able to set up a payment plan by filing a paper return but will have to calculate their self-assessment themselves.
As paper filers tend to be older people, some of whom may be lacking the technological sophistication to file online, or those on low incomes who cannot readily afford access to the internet, there is a concern that that guidance may be somewhat unfair. The regulations or perhaps even the guidance itself, should require HMRC to provide those people with help in making their calculations, on request. I would be grateful if the Minister responded on that point.
There is also the question of penalties in the event of failure to maintain a payment plan. In the event of a taxpayer failing to keep up agreed payments, subsections (6) and (7) of clause 110 allow HMRC to give notice to the taxpayer that he is relieved from penalties that would otherwise arise. However, that safeguard appears to operate at HMRCs discretion, so that it would be reliant on the guidance and individual officers applying that guidance in practice. The LITRG argues that there should be a statutory right of appeal if HMRC refuses to give such a notice. If there is no such right, the taxpayer would have no recourse against HMRC if it exercised its discretion wrongfully, except by way of judicial review, which is no real remedy, as the Minister will know, because it is well beyond the means of the majority of individual taxpayers and certainly beyond the means of most of the taxpayers that we are talking about. Again, I would be grateful for the Ministers comments.
Finally the LITRG has highlighted to us that Budget note 88 tells us that MPPs will not be introduced before April 2011, because changes are needed to HMRCs systems. I seek some reassurance from the Minister that HMRCs systems will be able to cope, given the increased pressures on its finances. Also, has any consideration been given to trialling the new scheme prior to widespread and national implementation in 2011?

Ian Pearson: I welcome the Oppositions overall support for MPPs. As the Committee will be aware, entry to a plan will be wholly voluntary. First, the taxpayer must agree to pay the tax in instalments and HMRC must agree to accept payments in that way. Secondly, instalments paid before the normal date must be balanced by those paid afterwards. I believe that MPPs are an important way in which we can help taxpayers to manage their money.
The hon. Gentleman asked a number of detailed questions. First it is right, as he will appreciate, that the guidance that we published in draft sets out a framework for MPPs and how the HMRC will operate them. Clearly, most of the detail is contained in the guidance, on which we have been consulting, rather than in the Bill. The detail of any particular payment plan will be in the terms and conditions under which HMRC makes it available and the taxpayer chooses to accept. We do not believe that it is necessary for such a level of detail to be in regulations. If a default occursobviously, we hope that such cases will be few and far betweenthe taxpayer would be in breach of the terms of their own plan and would therefore be liable for the consequences of their late payment.
Subsection (7) allows HMRC to relieve the taxpayer from penalties following a failure to make agreed payments, where that is appropriate. It is not an entitlement, but may be offered to taxpayers where they continue to pay by agreed instalments. That will happen where the taxpayer has approached HMRC before the payment date and has either made good the deficient payment within a few days, or arranged time to pay the balance
Independent research commissioned by HMRC and by others shows that direct debit is favoured by many, including most businesses. Although it is HMRCs preferred method of payment, its officers will not put pressure on taxpayers to pay in that way. Following representations made in the consultation, HMRC will offer MPPs for some of the electronic payment methods, such as standing orders. Assorted information that HMRC would require would include fully completed pay slips showing the correct taxpayer reference, year, and amount of payment.
On statutory rights of appeal, it is not the case that there is a statutory right of appeal. We certainly want to encourage anyone in difficulties to approach HMRC. As I have indicated, where the taxpayer has approached HMRC before the payment date and has either made good the deficient payment within a few days, or set up an arrangement for time to pay the balance, HMRC would want to respond favourably. Of course, all late payment penalties can be appealed in the usual way.
We are confident that HMRCs systems will be able to cope with implementation. Strong governance will be provided by a dedicated implementation team, overseen by an implementation forum of leading officials and industry figures. HMRC will continue to look at whether it will be appropriate to trial the changes in the course of development, but we believe that MPPs are an important initiative and that is why they have been included in this years Finance Bill.

Question put and agreed to.

Clause 110 accordingly ordered to stand part of the Bill.

Clause 111 ordered to stand part of the Bill.

Bob Blizzard: On a point of order, Mr. Atkinson. I commend you on your five and a half hour-plus stint today.

Peter Atkinson: I am grateful.

Ordered, that further consideration be now adjourned.(Mr. Blizzard.)

Adjourned till Thursday 25 June at Nine oclock.